The emergence of challenger banks over the past decade has not only given consumers more choice, but it’s also fundamentally reshaped the financial ecosystem and driven incumbents to innovate.
And unlike conventional banks that rely on their reputation to retain and attract new customers, these new digital banks embrace new financial technology to reduce costs and better meet customer needs.
“Bankers are more internally oriented and process oriented. At Bunq we operate the other way around. We try to really understand what our users want and need and try to surprise and delight them by applying technology,” Ali Niknam, founder and CEO of Amsterdam-based challenger bank Bunq, told PYMNTS in a recent interview.
According to Niknam, as much as Bunq’s technology is essential and built to offer instant solutions, having a mindset geared toward meeting consumer wants and needs is what sets the neobank apart from other players in the space.
Read more: Why Bunq Banks On The Cloud For An Innovative Edge
“We have created our entire core banking, core processing [and services] ourselves. We have a fully tested pipeline [that] we can deploy in a couple of minutes. We do continue to supply, which I don’t think is something any traditional bank does, so we’re very quick on our feet to introduce new features that help make life easy for users,” he said.
Available in 30 markets across the European Economic Area (EEA), the neobank received a full banking license from the Dutch Central Bank (DNB) in 2014 — German rival N26 is currently the only other European player with a full banking license — and allows users to open a personal or business bank account in about five minutes, with a 30-day trial period to test the product.
In April last year, the Amsterdam-based digital bank announced that they had reached 1 billion euros ($1.11 billion) in user deposits since launch in 2012, which was followed by a mega $228 million raise at a $1.9 billion valuation in July after being a bootstrapped company since its launch in 2012.
Beyond Banking Services
Bunq has expanded beyond basic banking services into different verticals, including partnering with Dutch lender Tulp to offer mortgages to customers.
According to Niknam, the Dutch mortgage market is a “gigantic” market worth about $800 billion today, presenting a huge opportunity for Bunq to modernize the loan process and make it more efficient for consumers.
See also: Bunq Adds New Feature Allowing Shared Bank Accounts With Non-Users
“One of the opportunities we saw is that it often takes a couple of weeks for traditional mortgage suppliers to give you an answer on your mortgage application and given that many of our users are going to have their very first mortgage and their first house, we know that it can be quite stressful for people to have to wait to get a response on their mortgage application,” Niknam explained.
Bunq now offers a bank mortgage solution that allows customers to have their mortgage application reviewed within 24 hours, making the complex process less stressful and more attractive for customers who are purchasing a home for the first time.
The Dutch FinTech has also ventured into the digital wealth space, recently launching a new feature in partnership with Luxembourg-based investment firm Birdee that will allow customers to invest their cash in a range of socially and environmentally responsible companies via three diversified portfolios, depending on their risk appetite.
“I [can] set up my payments to be five euros, which means that every payment I complete gets rounded up to five euros and the difference is invested automatically into green investments,” Niknam noted.
New Guys Versus the Old Guys
There’s been a boom in digital banks across Europe and while it is common to pitch one neobank against the other, Niknam argued that it’s rather “the new guys versus the old guys” and the real competition is between new entrants like Bunq and conventional, established banking players in the region.
“Even the largest new challenger banks don’t even have a percent of market penetration. If you asked me who my peers are, I would say the new banks. Who’s my competition? I’d say HSBC, Lloyds, and BNP Paribas. It’s those players that already have the market share and continue to service their customers in a suboptimal way,” he said.
He went on to say that each challenger bank has their own niche or target market and for Bunq, it’s all about placing the users at the center of their offering, which over time has led users to trust its reliability and embrace it as a bank replacement.
Bunq, Niknam said, “goes further than just cheap FX [foreign exchange rates] or further than just [managing] money and it is actually a proper bank replacement. And I think that is thanks to the close relationship we have with our users that helps us make their life easy.”
The company now has its eyes set on expanding to other countries in the region, targeting Germany and France where the product is already popular among users. He acknowledged, however, that going from a small country like the Netherlands to a country that is six times larger like Germany will be a daunting task.
“But I’m very excited about it because if I look at our product and if I look at how our users respond to it, I believe we have a very good chance to make a reasonable impact,” he said.
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